Thr Hon’ble Mr. Justice Ravi v. Hosmani

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 22 DAY OF SEPTEMBER, 2021 PRESENT THR HON’BLE MRS.JUSTICEK S.SUJATHA ANT) THR HON’BLE MR. JUSTICE RAVI V. HOSMANI I.T.A.No.377/2018 BETWEEN : SMI.RAJAGOPAL PRATHIBA>#293, JAI NILAYA’, 19 MAIN,"[‘T]BLOCK, KORAMANGALA,BBENGALURU-560095.PAN: APPRLLANT| (BY SRI A.SHANKAR, SENIOR COUNSEL A/WSRI BHAIRAV KUTTAIAH, ADV. FOR SRI M.LAVA, ADV.) AND ; THERE DBPUTY COMMISSIONER OFINCOME TAX, CIRCLE-4(3)(1),BMTC BUILDING, 80 FEET ROAD,KORAMANGALA, 6 BLOCK,BHNGALURU-5S60095. .. RESPONDENT. (BY SRI K.V.ARAVIND, ADV.) THIS INCOME TAX APPEAL IS FILED UNDER SECTION|2600-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 17.01.2018 PASSED IN ITA No.1257/BANG/2017 FOR,THE ASSESSMENT YEAR 2012-2013 |VIDE ANNEXURE-A],.PRAYINGTO(A)|TO|RFORMULATETHESUBSTANTIAL|QUESTIONS OF LAW STATED ABOVE AND ANSWER THE SAMEIN FAVOUR OF THE APPELLANT. (B) TO ALLOW THE APPEALAND SET ASIDE THB FINDINGS THEBRBIN TO THR BXTENT AGAINST THR APPBLLANT IN THR ORDER PASSED BY THE!INCOME-TAX APPELLATE TRIBUNAL, 'C'’ BENCH, BENGALURUIN ITA NO.12957/BANG/2017 DATED 17.01.2018 FOR THEASSESSMENT YEAR 2012-2013 . THIS APPEAL COMING ON FOR HEARING, THIS DAY,|S. SUATHA, J., DELIVERED THE FOLLOWING: JU DGMENT This appeal is filed by the assessee undersec.260A of the Income Tax Act, 1961 (for short, ‘theAct) assailing the order of the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru, dated 17.01.2018 relating to the assessment year 2012-13. 2. The appeal was admitted on 17.12.2018 to consider the following question of law: “Whether the Tribunal was justified in|law in denying deduction under Section 57(tt)|of the Act for a sum of Rs.38,18,047/- being|interest paid to the bank without considering|all the materials placed by the appellant and|consequently passed a perverse order on thefacts and circumstances of the caseP 3. The assessee 1S an individual and derives income from house property and from other sources as. - 3 -. well which includes income from furniture, fittings,fixtures and other equipments fitted in the property. —Relating to the assessment year in question, theASSECSSEEfiled|return|oT incomeamountingTO Rs.14,59,863/- as income from the house property andRs.8.94,86060/- as income from other sources. Thereturn was processed under Section 143 (1) of Act. Thecase having been selected for scrutiny assessment, anassessment order under Section 143 (3) of the Act was.passed on 29.3.20105 by the assessing officer disallowingexpenditure incurred from other sources under Section —of (111) of the Act to the extent of Rs.38,12,047/-. Theassessing officer also disallowed deduction claimedunder Section 24 (b) of the Act in relation to incomefrom house property. Being aggrieved, the assesseepreferred an appeal before the Commissioner of IncomeTax (Appeals)-4, Bengaluru. - 4 _| 4. Learned Commissioner of Income Tax (Appeals)allowed the appeal in part granting the relief ofdeduction claimed by the assessee Under Section 24 (b)of the Act, however, denying the relief insofar as thededuction disallowed u/s 9/ (ii) of the Act. Beingaggrieved, the appellant-assessee as well as the Revenuepreferred appeals before the Tribunal. Oo. The Tribunal, after haring parties, passed acommon order upholding order of the Commissioner ofIncome Tax (Appeals)-4, dismissing the appeals of boththe appellant and the Revenue. Being aggrieved by thesaid order, assessee has preferred this appeal. 6. Learned counsel senior counsel for theassessee submitted that the Tribunal dismissed the'appeal of the assessee mainly on the ground that nodetailsOT thefurnitureandfixtures,electricalinstallations, etc. were provided by the assesseedehorsclause 1.1 of the agreement dated 95.12.2007 and clause -5 -| Oo. The Tribunal, after haring parties, passed acommon order upholding order of the Commissioner ofIncome Tax (Appeals)-4, dismissing the appeals of boththe appellant and the Revenue. Being aggrieved by thesaid order, assessee has preferred this appeal. 6. Learned counsel senior counsel for theassessee submitted that the Tribunal dismissed the'appeal of the assessee mainly on the ground that nodetailsOT thefurnitureandfixtures,electricalinstallations, etc. were provided by the assesseedehorsclause 1.1 of the agreement dated 95.12.2007 and clause -5 -| (B) of the agreement dated 21.5.2008 which reflects theannexures and the schedule appended thereto. Learnedsenior counsel made an attempt to demonstrate that thedetails of furniture and fixtures were made available to the authorities and the Tribunal as well, but fairlysubmitted that the annexure referred to in the!agreement dated 05.12.2007 and the schedule to theagreement dated 21.05.2008 were not furnished. 7/7. Learned counsel for the respondent-Revenujustifying the impugned orders, submitted that noexception can be found with the order of the Tribunalsince no evidence was placed on record to claim thededuction under Section 9/7 (ili) of the Act being theinterest paid to Karnataka Bank. 8.|We.havecarefullyconsideredthe rival.submissions of the parties and perused the material onrecord. -6 -| 9. It is apparent that the assessee was calledupon to substantiate the expenditure incurred and howit is correlated with the earning of rental incomeinasmuch as the furniture and fixtures are concerned. >No required documents referred to in the agreements.dated 5.12.2007 and 2?21.5.2008 were made availableither before the authorities or before the Tribunal. |The Tribunal has extracted the relevant paragraphs ofthe agreement entered into between the assessee andthe lessee with respect to furniture and fittings and thesame reads thus: Clause 1.1 of the agreement dated 05.12.2007 “In consideration of the hire charges herein|reserved and the covenants herein contained, |the Lessor does hereby agree to demise unto theZinnov, by way of hire, the Fittings and Fixtures|provided in the Schedule Property and as at|Annexure A TO HOLD the same unto the Zinnov,for a period of Nine (9) Years from the Hure|Commencement Date and to expire after aperiod of 9 (Nine) years there from, PAYING|THEREFOR, an aggregate monthly hire charges| of Rs.2,00,000/- (Rupees Two Lakhs Only) and|subject to the enhancement as agreed upon and|further subject to TDS as per applicable. In the|event of any delay in the payment of the hire|charges, in such an event the Zinnov shall be|liable to pay the same together with interestthereon @ 1.5% per month or part thereof.” ol. No. B of the agreement dated 21.5.2008| “B. The owner has agreed to give on hireto the Hirer for use exclusively other LeasedPremises, certain furniture, fittings and fixtures|which belong to the Owner absolutely and areavailable at the Leased Premises more fully|enumerated in the Schedule I and hereinafter|referred to as ‘Hired Utilities’ for ao period of 5(fie) years commencing on I[St]June, 2008 andterminating on 31[St]May, 2013 and thereafterrenewable as per clause 1.2 of this agreement.” 10. In the absence of the relevant Annexure and the Schedule I description referred to in the agreements,the Tribunal has opined that the assessee has failed toprove the nexus of the expenditure incurred by it with -8 -| the borrowed funds and confirmed the disallowance ofthe claim made in this regard. “B. The owner has agreed to give on hireto the Hirer for use exclusively other LeasedPremises, certain furniture, fittings and fixtures|which belong to the Owner absolutely and areavailable at the Leased Premises more fully|enumerated in the Schedule I and hereinafter|referred to as ‘Hired Utilities’ for ao period of 5(fie) years commencing on I[St]June, 2008 andterminating on 31[St]May, 2013 and thereafterrenewable as per clause 1.2 of this agreement.” 10. In the absence of the relevant Annexure and the Schedule I description referred to in the agreements,the Tribunal has opined that the assessee has failed toprove the nexus of the expenditure incurred by it with -8 -| the borrowed funds and confirmed the disallowance ofthe claim made in this regard. 11. The arguments of the learned counsel thateCVETin.theabsenceoT|theAnnexure /Schedulementioned in the agreements, the other materialavailable on record ought to have been considered bythe Tribunal for adjudicating upon the claim made bythe assessee, does not hold water, as the documentsmentioned in the agreements being relevant. At thisjuncture, learned senior counsel representing theassessee requested for an opportunity to furnish thesaid particulars referred to, in the agreements dated05.12.2007 and 21.05.2008 to establish the nexus for|claiming the deduction under Section 9/7/(111) of the Acwith the borrowed funds. 12. It is discernable that the Tribunal hasdismissed the appeal solely on the ground that theAnnexure/Schedulementionedintheagreements placed on record by the assessee were not madeavailable to decide the issue of deduction under Sectiono/ (ii) of the Act. As such, we are of the consideredopinion that providing one more opportunity to theassessee to furnish the details would not prejudice therights of the Revenue. Given the circumstances, we setaside the order impugned and remand the matter to theAssessing Officer to provide an opportunity to theassessee to furnish the Annexure/Schedule mentionedin the agreements in support of her claim made, withoutanswering the substantial questions of law raised. 13. For the reasons aforesaid, we pass thefollowing | ORDER 5*The appeal is allowed in part.55*Theimpugnedorder.dated17.01.2018|passed in ITA No.1297/Bang/2017 by the IncomeTax Appellate Tribunal, Bengaluru Bench “‘C’,Bengaluru, is set aside. VGH 555*The matter is remanded to the AssessingOfficer for reconsideration keeping open all therights and contentions of the parties. | 5I*The assessee is at liberty to place Annexure— A referred to, in the agreement dated 09.12.2007 at SI.No.1.1 and the details ot the Schedule -— [mentioned at SI.No.B of the agreement dated21.05.2008 in support of her claim made towardsdeduction under Section oO/(1i11) of the Act for sum of Rs.30,49,372/- being interest paid to theKarnataka Bank. The Assessing Officer shallconsider the same and pass appropriate orders inaccordance with law in an expedite manner. Sd/-.JUDGE| Sd/-.JUDGE.